The Turkish government moved swiftly to calm investors before financial markets reopened today after a failed coup, with the central bank promising unlimited liquidity to lenders and the deputy prime minister posting on Twitter that there’s “no need to worry.”
Turkey’s lira plunged the most against the dollar in eight years on Friday as tanks rolled through the streets of Ankara and Istanbul, and warplanes and helicopters circled overhead.
While President Recep Tayyip Erdogan’s forces rounded up thousands of judges and military officers allegedly involved in the coup attempt, officials sought to prevent a sell-off when stocks and bond traders have their first chance to react today.
“We’re on duty,” Simsek said on Twitter, adding that he’d spoken to central bank Governor Murat Cetinkaya and was going to hold a teleconference with international investors.
“Turkey is normalising rapidly after the coup attempt was repelled by the nation. Our country’s macroeconomic foundations are solid.”
In addition to guaranteeing liquidity, the central bank said it would support the lira by removing the limits on foreign currency deposits that commercial lenders are allowed to use as collateral. Oil and gas imports and exports are unaffected by the coup.
Though quashed within hours, the failed takeover threatens to destabilise an economy that depends heavily on capital inflows to finance its current-account deficit.
Erdogan’s increasingly authoritarian streak was already worrying investors as he pushed his top economic advisers one-by-one from office, stoking fears of policy mistakes and leading to a drop in foreign investment.
Sekerbank TAS, an Istanbul-based lender owned by its employee pension fund and Kazakhstan’s sovereign wealth fund, postponed investor meetings scheduled for yesterday for a proposed bond sale of as much as $300m after the coup attempt.
It will now contact investors to reschedule the meetings, bankers with knowledge of the deal said in an e-mail.
“Clearly the attempted coup in Turkey will make investors and other market participants more wary of participating in Turkish fixed income paper, at least until we get some clarity and the political situation stabilizes,” said Chavan Bhogaita, head of markets strategy at National Bank of Abu Dhabi.
Of the $15.8bm foreigners poured into Turkey in the first five months this year, net direct investments accounted for only $2.3bn — down 50% from the same period a year ago — with the remainder coming from inflows of hot money into stocks and bonds, as well as other investments including loans to banks and companies.
That “will now surely reverse, causing inevitable market distress,” Michael Howell, managing director of CrossBorder Capital, said in an e-mail.